The budget identifies the money you will need to spend. Finance uses the budget to manage cash flow, which is why it is critical that you meet your budget projections. Expense and budget management is an on-going activity regardless of financial conditions or the time of year. On a regular basis, make sure you (or someone in IT) carefully reviews monthly spending reports that compare the budget to actual spending. It is usually not enough to assume that accounting or finance is executing this function. If significant overages (5 to 10 percent) occur, communicate it immediately. Trying to hide or delay communication of major overruns costs you credibility and is career limiting. If you have the opportunity to reforecast in the middle of the year, be sure you re-analyze in total and consider the timing of expenses. If you have unplanned expenditures, make projections to identify the variation in the budget.
In addition to watching budget-to-actual spending, it is critical to thoroughly review and check invoices against contract terms and conditions. It is amazing how much cost savings you are able to realize by being diligent and watching invoices. Be sure to report project-related financials as a function of the project reporting process.
If company results are less than forecasted, you may need to stop or postpone projects. If that is the case, complete a full analysis depending on where each project is in the life cycle. Postponing projects midstream often costs 10 to 30 percent more than original estimates due to the momentum and knowledge lost in stopping the effort.
Frequently, the business improves and the outlook is favorable as the business enters the fourth quarter. Know what expenditures would be useful and provide business value if you are given the go-ahead to overspend the budget.
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